Use this glossary of key investment terms to make choosing an investment a little simpler.
- Annuity
- Asset class
- Base Rate
- Blue chip
- Broker
- Capital
- Capital growth
- Compound interest
- Diversification
- Dividend
- Equities
- Inflation
- Liquid asset
- Open Ended Investment Company (OEIC)
- Ordinary shares
- Paper loss
- Pension
- Personal allowance
- Pooled investment
- Portfolio
- Tax wrapper
- Unit Trust
Annuity
An annual payment/receipt. Normally used to provide a retirement income.
Asset class
The asset class is what the money from your investment is actually put into, e.g. shares, bonds, property and cash deposits.
Base Rate
The interest rate set by the Bank of England.
Blue chip
An informal term used to refer to leading companies on the stock market.
Broker
An agent who acts as an intermediary between buyers and sellers, usually for payment of a commission.
Capital
The money you initially invest.
Capital growth
This is any increase in the original amount you invested, after costs, charges and depreciation.
Compound interest
This is the cumulative effect of earning interest on your savings and leaving your interest in the savings account.
Diversification
A payment made to shareholders/unit holders from a company/investment group.
Dividend
A payment made to shareholders/unit holders from a company/investment group.
Equities
Another name for shares.
Inflation
An increase in the level of prices of goods and services in the economy. It is measured by examining a typical basket of goods and services.
Liquid asset
An asset that can be quickly, easily and inexpensively turned into cash.
Open Ended Investment Company (OEIC)
A type of pooled investment fund, open ended investment funds can create new shares or cancel existing shares in issue.
Ordinary shares
A class of share usually associated with UK stock market investments. Shareholders have the right to receive distributed profits and vote at annual general meetings.
Paper loss
Also known as unrealised loss, this is where an asset or investment has decreased in value before you come to cash it in, i.e. your investment is worth less 'on paper'.
Pension
In simple terms this is an income plan for income to be taken in retirement.
Personal allowance
The amount of income an individual can earn free of tax.
Pooled investment
Many people putting their money together into a single investment fund.
Portfolio
A collection of investments that can include any or all asset types.
Tax wrapper
Tax breaks that an investor can 'wrap' around their investment, so that they can are sheltered from paying some or all tax on it. The most common tax wrappers are ISAs and pensions.
Unit Trust
A pooled fund that is established under trust.